Regulatory Cooperation Toolkit Dr Peter Mumford, New Zealand

Problem definition and purpose The most common reasons for regulatory cooperation are: Facilitating connectivity/lowering barriers to trade and investment, including the costs of regulatory compliance and the costs associated with participating in multiple markets, such as additional costs of testing and certification in the other market. Increased policy and regulatory effectiveness across borders, by ensuring that activities and people are not able to escape the reach of the law by crossing borders, and sharing information on potential regulatory risks. More cost effective policy development and implementation and enhanced capacity within Government through sharing ideas and resources. Encouraging domestic regulators to follow regulatory best practice. Encouraging regulatory competition (particularly associated with some forms of mutual recognition). Enhancing influence in international standards setting processes.

Options for cooperation The cooperation spectrum Undertake unilateral alignment with the laws of other countries and/or international norms and standards – Unilateral adoption – Unilateral recognition Enter into facilitative arrangements that build understanding and confidence, and promote mutual learning – Policy coordination – Cross-agency appointments Enter into formal arrangements that create rights and obligations, and are often reflected in Treaties – Enforcement cooperation – Joint standards development – Harmonisation – Mutual recognition – Joint institutions

Analysis of options (harmonisation example) Description Two or more Economies harmonise standards or rules (harmonised standards or rules are substantially the same but may not be identical). StrengthsIssues Provides a high level of certainty to firms (they know they only need to comply with one set of standards or rules). The process can also result in some of the benefits associated with facilitative arrangements such as the sharing of resources. Can limit the ability of the Economies to determine their own policy and regulatory settings. Can be highly resource intensive. May favour the larger partner(s) in the arrangement. May result in the ‘highest common denominator’, leading to over-regulation. Some of the risks of harmonisation can be managed through: Opt-out provisions which reintroduce some flexibility. Creating dual regimes.

Analysis of options (MR example) Description An Economy retains its own standards or rules, while recognising the standards or rules of the other Economy, and vice versa. StrengthsIssues Can be a particularly effective form of co-ordination, as it allows each Economy to maintain its own standards or rules while removing the cost of having to comply with two sets of rules or conformity assessment requirements. Can provide a high level of certainty to firms operating in both markets. Can support regulatory competition. May only viable when there is already a high level of convergence between the two sets of policies, standards or rules of the participating Economies. Require the support of national regulators. Are generally supported by commitments to on-going policy coordination. The commitment to policy coordination may reduce flexibility of the parties to determine their own policy and regulatory settings over time.

Creating the conditions for success Lessons learnt from the experiences of APEC Economies: – It is easier to prevent unnecessary regulatory differences than to remove existing ones. – Avoid long-standing trade irritants. – Focus on areas with the best prospects of success and where the net benefits are highest. – Engage external stakeholders. – Focus on the long term. – Leadership, commitment and momentum are crucial.